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Understanding Network Virtualization with VMware NSX


Understanding how physical networks and virtual networks come together to provide an end-to-end solution is critical to running a stable production environment. The physical and virtual networks interact with each other to provide different functionality. There are some additional layers with the introduction of overlay networks such as VMware NSX. This topic explains the following concepts:

VMware vSphere Architecture

The VMware vSphere architecture is very simple. There are two ESXi hosts in a cluster called “New Cluster.” Both of the hosts have a distributed virtual switch called “DSwitch” with a single port group “DPortGroup” as shown in Figure 1. The cluster is assigned to a data center called “Datacenter.”

Figure 1: VMware vSphere Architecture
VMware vSphere Architecture

All NSX appliance VMs are placed into the distributed virtual switch “DSwitch.” The local vSwitch0 is no longer used for any type of traffic; all underlay traffic will ingress and egress the distributed virtual switch.

VMware NSX

To enable SDN, there are many functions from management to packet forwarding that need to be performed. Each functional component is described next.

VMware NSX Manager

The VMware NSX Manager provides integration with VMware vCenter Server which allows you to manage the VMware NSX environment through VMware vCenter. All VMware NSX operations and configuration is done through VMware vCenter, which communicates with VMware NSX Manager through APIs to delegate tasks to the responsible owner.

VMware NSX Controller

All virtual network provisioning and MAC address learning is handled through the VMware NSX Controller. You can think of the VMware NSX Controller as the virtualized control plane of the SDN network.

VMware NSX Logical Distributed Router

The VMware NSX Logical Distributed Router (LDR) is responsible for forwarding and routing all packets through the virtualized SDN networks. It provides the following functionality:

  • Default gateway for all VMs

  • MAC address learning and flooding

  • Bridging and routing all packets between different virtual networks

  • Peers with the VMware NSX Edge to progress egress traffic outside of the virtual networks

  • Virtual tunnel end-point (VTEP) termination

  • Security policies and enforcement

  • Multi-tenancy

The NSX LDR is a great tool for coarse or fine-grained virtual network segmentation. Multiple VMware NSX LDRs can be created to enable multi-tenancy or a completely separate security zone for regularity requirements such as Payment Card Industry Data Security Standard (PCI DSS). Each VMware NSX LDR can create virtual switches, which are just VXLAN Network Identifiers (VNIs). You can treat virtual switches just like you used to use VLANs in a physical network. Virtual switches are an easy way to create multi-tiered networks for applications.

The VMware NSX LDR is split into two components: a control plane and data plane. The control plane is responsible for the management and provisioning of changes. The VMware NSX LDR is also installed into each VMware ESXi host to handle the traffic forwarding and routing as shown in Figure 2.

Figure 2: VMware NSX LDR Control Plane and Data Plane
VMware NSX LDR Control Plane and Data

Each VMware host has a copy of the VMware NSX LDR running in the hypervisor. All of the gateway interfaces and IP addresses are distributed throughout the VMware cluster. This allows VMs to directly access their default gateway at the local hypervisor. VMware NSX supports three methods for MAC address learning:

  • Unicast—Each VMware host has a TCP connection to the VMware NSX Controller for MAC address learning.

  • Multicast—The physical network – in this case, the Virtual Chassis Fabric – uses multicast to replicate broadcast, unknown unicast, and multicast traffic between all VMware hosts participating in the same VNI.

  • Hybrid—Each VMware host has a TCP connection to the VMware NSX Controller for MAC address learning, but uses the physical network for local process of broadcast, unknown unicast, and multicast traffic for performance.

If your environment is 100 percent virtualized, we recommend that you use either unicast or hybrid mode. If you need to integrate physical servers – such as mainframes – into the VMware NSX virtual environment, you need to use multicast mode for MAC address learning. Virtual Chassis Fabric allows you to configure multicast with a single IGMP command and not have to worry about designing and maintaining multicast protocols such as PIM.

All of the VMware NSX virtual switches are associated with a VNI. Depending on the traffic profile, the LDR can either locally forward or route the traffic. If the destination is on another host or outside of the virtual NSX networks, the VMware NSX LDR can route the traffic out to the VMware NSX Edge Gateway.

Each hypervisor has a virtual tunnel end-point (VTEP) that is responsible for encapsulating VM traffic inside of a VXLAN header and routing the packet to a destination VTEP for further processing. Traffic can be routed to another VTEP on a different host or the VMware NSX Edge Gateway to access the physical network.

In Table 1, you can see all of the possible traffic patterns and how the VMware NSX LDR handles them.

Table 1: Traffic Patterns Handled by VMWare LDR




Local VM

Local VM, same network

Locally switch traffic

Local VM

Local VM, different network

Locally route traffic

Local VM

Remote VM, same network

Encapsulate traffic with VXLAN header and route to destination VTEP

Local VM

Remote VM, different network

Encapsulate traffic with VXLAN header and route to destination VTEP

Local VM


Encapsulate traffic with VXLAN header and route to VMware NSX Edge Gateway

Local VM

Physical server outside of NSX virtual networks

Encapsulate traffic with VXLAN header and route to VMware NSX Edge Gateway

VMware NSX Edge Gateway

The VMware NSX Edge Gateway is responsible for bridging the virtual networks with the outside world. It acts as a virtual WAN router that is able to peer with physical networking equipment so that all of the internal virtual networks can access the Internet, WAN, or any other physical resources in the network. The VMware NSX Edge Gateway can also provide centralized security policy enforcement between the physical network and the virtualized networks.

The VMware NSX Edge Gateway and LDR have a full mesh of VXLAN tunnels as shown in Figure 3. This enables any VMware ESXi host to communicate directly through the VXLAN tunnels when they need to switch or route traffic. If traffic needs to enter or exit the VMware NSX environment, the VMware NSX Edge Gateway removes the VXLAN header and routes the traffic through its “Uplink” interface and into the Virtual Chassis Fabric.

Figure 3: VXLAN Tunnels
VXLAN Tunnels

Each virtual switch on the VMware NSX LDR needs to be mapped to a VNI and multicast group to enable the data plane and control plane. It is as simple as choosing a different VNI and multicast group per virtual switch as shown in Figure 4.

Figure 4: Overlay Tunnels and Multicast Groups
Overlay Tunnels and Multicast Groups

As VM traffic from esxi-01 needs to reach esxi-02, it simply passes through the VXLAN tunnels. Depending on the type of traffic, there are different actions that can take place as shown in Table 2.

Table 2: Traffic Types and Actions

Traffic Type



Route directly to the remote VTEP through the Virtual Chassis Fabric

Unknown Unicast

Flood through multicast in the Virtual Chassis Fabric


Flood through multicast in the Virtual Chassis Fabric

It is possible to associate multiple VNIs with the same multicast group; however, in the MetaFabric Architecture 2.0 lab, we assigned each VNI a separate multicast group for simplicity.

Overlay Architecture

The term “underlay” refers to the physical networking equipment; in this case, it is the Virtual Chassis Fabric. The term “overlay” refers to any virtual networks created by VMware NSX. Virtual networks are created with a MAC-over-IP encapsulation called VXLAN. This encapsulation allows two VMs on the same network to talk to each other, even if the path between the VMs needs to be routed as shown in Figure 5.

Figure 5: Overlay Architecture
Overlay Architecture

All VM-to-VM traffic is encapsulated in VXLAN and transmitted over a routed network to the destination host. Once the destination host receives the VXLAN encapsulated traffic, it can remove the VXLAN header and forward the original Ethernet packet to the destination VM. The same traffic pattern occurs when a VM talks to a bare metal server. The exception is that the top-of-rack switch handles the VXLAN encapsulation on behalf of the physical server, as opposed to the hypervisor.

The advantage of VXLAN encapsulation is that it allows you to build a network that is based on Layer 3. The most common underlay architecture for SDN is the IP fabric. All switches communicate with each other through a typical routing protocol such as BGP. There is no requirement for Layer 2 protocols such as Spanning Tree Protocol (STP).

One of the drawbacks to building an IP fabric is that it requires more network administration. Each switch needs to be managed separately. Another drawback is that to allow the integration of bare metal servers with VMware NSX for vSphere, multicast is required for the integration of VXLAN and MAC address learning. This means that in addition to building an IP fabric with BGP, you also need to design and manage a multicast infrastructure with Protocol Independent Multicast (PIM) protocols.

The advantage of Virtual Chassis Fabric is that you can build an IP fabric and multicast infrastructure without having to worry about BGP and PIM. Because the Virtual Chassis Fabric behaves like a single, logical switch, you simply create integrated routing and bridging (IRB) interfaces and all traffic is automatically routed between all networks because each network appears as a directly connected network. To enable multicast on a Virtual Chassis Fabric, you simply enable Internet Group Management Protocol (IGMP) on any interfaces requiring multicast. There is no need to design and configure PIM or any other multicast protocols.